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The good and bad of working with big-box stores

Published: Monday, August 19, 2013 at 1:00 a.m.

Last Modified: Sunday, August 18, 2013 at 11:00 p.m.

'There is only one boss, the customer," said the late Sam Walton, founder of Walmart. "And he can fire everybody in the company, from the chairman on down, simply by spending his money somewhere else."

So far, the customers have not fired the world's largest retailer, and Walmart continues to grow. That's because shoppers continue to patronize the big-box retailer for its low-priced merchandise and pay less attention to the ongoing flack it gets from residents who do not want Walmart in their neighborhoods.

According to the company's website, Walmart started from "humble beginnings as a small discount retailer in Rogers, Ark."

But "humble" no longer describes the retailing behemoth whose stores and affiliated brands operate more than 10,700 retail stores in 27 countries.

Walmart employs 2.2 million people. That includes 1.4 million in the U.S., 93,313 of them in Florida, with an average wage of $12.81 per hour for full-time workers.

In Florida, it pays hundreds of millions of dollars in annual taxes and is involved with charitable activities amounting to $59.4 million.

Yet this successful goliath got very little respect from neighborhood residents when it tried to resuscitate the failed Ringling Shopping Center close to the central business district in downtown Sarasota. Residents mobilized against Walmart's proposed store that could have upgraded the site.

In Sarasota County, residents also objected to Walmart's proposal to build a store at the southwest corner of Bee Ridge Road and Beneva Road. As they typically do, opponents said that the large retailer would create unwanted traffic and be unfair competition for the neighborhood's small-business owners.

Furthermore, detractors say Walmart's merchandise is inexpensive in part because they squeeze their suppliers' to the point where they lose money and go out of business.

After I wrote about Walmart's relationships with its suppliers in my February 25 column, Arnie Moschin emailed me that I "should have included the other big box stores as well: Target, Home Depot, Lowe's etc."

He recently moved to Sarasota and had experience supplying big-box retailers. "The boxes have a whole list of rules as to how you will do business with them and any deviation costs the supplier."

Examples that can "kill a supplier are things like return policy, missing paperwork on shipments to the stores and packaging errors."

Dan Nissen, a SCORE business mentor in St. Paul, Minn., added that big-box retailers are slow in paying their suppliers.

"They pay vendors in 90 to 120 days," and are using the suppliers' money to finance their inventory. They "have an inventory turnover rate considerably less than that, so by the time they need to pay the invoice, they have sold the goods."

By contrast, Steve Lovinger, a Manasota SCORE member and real estate agent, had profitable experiences supplying large retailers and took issue with my February column.

"I owned a beverage company that sold product to Walmart and Sam's Club for more than three years and absolutely disagree with the general information provided."

He offered the stores an incentive to pay him early.

"If you provide a payment discount of 1 percent or 2 percent for payment within 10 days, you get paid in 10 days," he says. "Build it in the cost to do business with them.

"Walmart was one of my favorite and most profitable customers," he says. "I called on them personally with assistance from my national account manager."

Some of the retail store owners that we advise at SCORE ask us how they can get their products on the shelves of large retailers.

The store owners are often start-up companies with a product that could be attractive for consumers. Even so, they do not have a plan for quickly manufacturing their product in large enough quantities to satisfy the potential appetites of stores such as Macy's, Target or Walmart.

What's more, they rarely have alternative retailers to pick up the slack if the big-box retailer stops buying their product. Instead, they place all their effort on one large retailer when they should be more diversified.

"One should not have all of your eggs in one basket," Lovinger says. "Twenty-five percent would be more appropriate as an absolute ceiling, but many factors would need to be considered."

Don't take on a customer that's too big for you to lose.

Jerry Chautin is a volunteer with Manasota.SCORE.org, a local nonprofit SBA resource partner offering free business advice and mentoring. He is SBA's 2006 national "Journalist of the Year" and a former entrepreneur, commercial mortgage banker and business lender. He writes and blogs about business and commercial real estate strategies for several publications and financial organizations nationwide. Contact him with your questions and stories at jkchautin@aol.com and follow him on Twitter, twitter.com/JerryChautin.

<p>'There is only one boss, the customer," said the late Sam Walton, founder of Walmart. "And he can fire everybody in the company, from the chairman on down, simply by spending his money somewhere else."</p><p>So far, the customers have not fired the world's largest retailer, and Walmart continues to grow. That's because shoppers continue to patronize the big-box retailer for its low-priced merchandise and pay less attention to the ongoing flack it gets from residents who do not want Walmart in their neighborhoods.</p><p>According to the company's website, Walmart started from "humble beginnings as a small discount retailer in Rogers, Ark."</p><p>But "humble" no longer describes the retailing behemoth whose stores and affiliated brands operate more than 10,700 retail stores in 27 countries.</p><p>Walmart employs 2.2 million people. That includes 1.4 million in the U.S., 93,313 of them in Florida, with an average wage of $12.81 per hour for full-time workers.</p><p>In Florida, it pays hundreds of millions of dollars in annual taxes and is involved with charitable activities amounting to $59.4 million.</p><p>Yet this successful goliath got very little respect from neighborhood residents when it tried to resuscitate the failed Ringling Shopping Center close to the central business district in downtown Sarasota. Residents mobilized against Walmart's proposed store that could have upgraded the site.</p><p>In Sarasota County, residents also objected to Walmart's proposal to build a store at the southwest corner of Bee Ridge Road and Beneva Road. As they typically do, opponents said that the large retailer would create unwanted traffic and be unfair competition for the neighborhood's small-business owners.</p><p>Furthermore, detractors say Walmart's merchandise is inexpensive in part because they squeeze their suppliers' to the point where they lose money and go out of business.</p><p>After I wrote about Walmart's relationships with its suppliers in my February 25 column, Arnie Moschin emailed me that I "should have included the other big box stores as well: Target, Home Depot, Lowe's etc."</p><p>He recently moved to Sarasota and had experience supplying big-box retailers. "The boxes have a whole list of rules as to how you will do business with them and any deviation costs the supplier."</p><p>Examples that can "kill a supplier are things like return policy, missing paperwork on shipments to the stores and packaging errors."</p><p>Dan Nissen, a SCORE business mentor in St. Paul, Minn., added that big-box retailers are slow in paying their suppliers.</p><p>"They pay vendors in 90 to 120 days," and are using the suppliers' money to finance their inventory. They "have an inventory turnover rate considerably less than that, so by the time they need to pay the invoice, they have sold the goods."</p><p>By contrast, Steve Lovinger, a Manasota SCORE member and real estate agent, had profitable experiences supplying large retailers and took issue with my February column.</p><p>"I owned a beverage company that sold product to Walmart and Sam's Club for more than three years and absolutely disagree with the general information provided."</p><p>He offered the stores an incentive to pay him early.</p><p>"If you provide a payment discount of 1 percent or 2 percent for payment within 10 days, you get paid in 10 days," he says. "Build it in the cost to do business with them.</p><p>"Walmart was one of my favorite and most profitable customers," he says. "I called on them personally with assistance from my national account manager."</p><p>Some of the retail store owners that we advise at SCORE ask us how they can get their products on the shelves of large retailers.</p><p>The store owners are often start-up companies with a product that could be attractive for consumers. Even so, they do not have a plan for quickly manufacturing their product in large enough quantities to satisfy the potential appetites of stores such as Macy's, Target or Walmart.</p><p>What's more, they rarely have alternative retailers to pick up the slack if the big-box retailer stops buying their product. Instead, they place all their effort on one large retailer when they should be more diversified.</p><p>"One should not have all of your eggs in one basket," Lovinger says. "Twenty-five percent would be more appropriate as an absolute ceiling, but many factors would need to be considered."</p><p>Don't take on a customer that's too big for you to lose.</p><p><i>Jerry Chautin is a volunteer with Manasota.SCORE.org, a local nonprofit SBA resource partner offering free business advice and mentoring. He is SBA's 2006 national "Journalist of the Year" and a former entrepreneur, commercial mortgage banker and business lender. He writes and blogs about business and commercial real estate strategies for several publications and financial organizations nationwide. Contact him with your questions and stories at jkchautin@aol.com and follow him on Twitter, twitter.com/JerryChautin.</i></p>